When you look back over the last ten years, you can quickly see that China’s digital catch-up occurred at the beginning of the decade, or even before and that it very quickly gained a lead over most Western countries. By the end of 2015, I was already no longer using cash or credit cards for purchases in China. I paid all through We Chat or Alipay. Everything became more straightforward with the digitalization, banking, health, and even the administrations took the train. The sector even flourished during the epidemic.
36.2% of GDP
China’s digital economy continues to grow. It generated 36.2% of China’s GDP in 2019, with 3500 billion yuan, contributing to 67.7% growth. Big data accounts for 810 billion, +32%. Information technology services and software companies posted an increase of 21.4% and Internet-related services of 29.1%. The electronic equipment manufacturing sector grew by 9.3%. The number of Internet transactions reached 3,481 billion yuan last year.
25% of retail sales of physical products online
In August, Internet retail sales of physical products, up 15.8%, accounted for a quarter of total sales. The material/concrete category 实物商品 includes all products that are delivered by a transportation system, such as clothing, books, food. They cannot be sold in a dematerialized manner, such as software or digital subscriptions. We cannot compare the same categories, but for your information, e-commerce in France is not expected to generate much more than 10% of retail sales this year. In the United States, the proportion of online sales rose from 15.1% in the second quarter of 2019 to 16.1% in the same period of 2020.
All the lights are green?
Revenues from Internet platforms increased by 13.6% in the first half of the year. The cloud sector also benefited from the increase in demand, with a growth of 14.3%. Industrial companies in services have exceeded the 400,000 mark and industrial APPs 250,000. Numerous transformations will come about; the government is pushing the digitization of the economy and society with significant resources. All sectors are affected, even agriculture. Digital money is taking its first steps. Ant, which will make its IPO, is driving the industry upwards with Alibaba and Tencent.
I took advantage of a question I was asked this week on the expression 月光族 to go back to 光 seen last month. 月, yuè, month, Moon and 族, zú, clan, family do not pose any difficulties.
月光, Moon Shine
As for 光 guāng, it has multiple meanings of light, brightness, and ray (of light). Moreover, 月光 has the meaning of brilliance or moonbeam, which remained in the Chinese imagination with Li Bai’s poem, Quite Night Thoughts. The first line: 床前明月光, chuāng qián ming yuè guāng, The front of the bed is illuminated by the brightness of the night (translation Javary).
光, consume to the end
In 月光族, 月光 cannot be translated by the brightness of the moon. Indeed, 月 has the meaning of month, and 光 has a relationship with two other of its functions. As an adjective 光 is the equivalent of nude, it is found in 光头 bald head and 光脚 barefoot. 光 may also be a result compound, it indicates the result of an action, which marks something that is completely consumed. 他吃光 了, he ate it all up ，他花光了, he spent it all.
月光, the salary (the month) is used up or month-naked.
Let’s go back to our expression, which refers to people who have spent all their salary and have nothing left at the end of the month or who spend more than they earn. We can explain the construction 月光 in two ways: The salary (the month) is exhausted or month-nude. We find the Chinese language’s flexibility with characters that fill a lot of boxes in the categories of grammar, noun, light, adjective, brilliant, resultant complement, used up.
The phenomenon of 月光族 is quite recently with the arrival of the consumer society. Parents, who have experienced more sober times, sum up the group motto “We spend as much as we earn, eat everything, and use everything and we are healthy! 挣多少用多少，吃光用光，身体健康, zhēng duōshǎo yòng duōshǎo, chī guāng yòng guāng, shēntǐ jiànkāng!
Xi Jinping visited the Hunan Province on September 16. What are his true intentions? Beyond the apparent meaning and the official speech, what messages does the Chinese president send?
Half of the blanket
He visited the Yao minority village in Shazhou, its infrastructure, and the exhibition hall, “the warmth of half the blanket.” What is this legendary episode? On November 6, 1934, the weather was already cold. The Red Army was passing through the village. Xu Jiexiu’s family offered three women from the Army to sleep in the warmth of their house. The wife, Xu Jiexiu slept with the three communists and the husband outside on a table. The Xu were very poor and did not even have a blanket. The three soldiers decided to leave their only blanket to the family, but the Xu refused. They insisted and finally cut the blanket in half and offered one half. The story was repeated to show the goodness of the Party towards the people. The trip highlights this benevolent relationship between the government and the Xi, who met the Xu children.
Hunan, DNA – Xi, legitimacy
Of course, any move has other meanings. Analyst Wang Jian deciphers it. First of all, it is carried out in Hunan. Symbolically, it takes place in a province that evokes the Communist Party. Hunan is Mao Zedong’s native province. The other symbolic place, visited by the top leaders when they want to convey a message, is Jiangxi, home to the first revolutionary bases and the Chinese Soviet republic in the 1930s. Jiangxi evokes the development of the CCP and Hunan, the DNA. Internal struggles often animate the CCP. Xi wants to remind that it has the legitimacy, even the DNA of the CCP. Former senior leaders like Chen Yun – one of the Party’s eight immortals – did not want to leave the Party’s leadership to just anyone. It must remain in the circle of the first generations. Xi is the son of a senior leader. He is one of the leaders of the second generation -红二代 (second generation red).
The People and the Party
Xi is close to the people and their origins. The village visited has just been lifted out of poverty; at the time of his last visit in 2016, there was 57% poverty. The official storytelling does not fail to underline this. Moreover, at the international level, under the pressure of the architects of the White House’s Chinese policy, American officials are increasingly making the distinction between the Chinese Communist Party and China for political purposes. This trip is a reminder that the government and the people are one. The reported words show a rather humble attitude (姿态), “I came here to learn,” recalling the speeches of a time when people were encouraged to learn from each other’s experiences.
In these challenging times, with international tensions and the economic consequences of the trade war and the epidemic, the president needs the support of the Party; he wants to unite the troops behind him. Travel in recent decades has sometimes been used to convey messages. Mao Zedong and Deng Xiaoping have used them. Xi Jinping is no exception. Alongside the usual propaganda discourse, it is worth remembering that while little is known about decision-making at the highest levels, the information that does come out indicates that unanimity is far from reigning and that every leader always needs to defend and strengthen his position.
Wang Jian deciphers this shift as follows: Xi Jinping wants to recall its legitimacy, the government’s proximity to the people, and rally the Party around it. In other words, how a legendary cover story is exploited!
We saw that the word 隔离 quarantine, isolation was formed of two characters. Today, we are looking at the second one, 离/離, lí, distant from, leave, separate.
A jiaguwen writing (on the right of the picture) evoked a bird and a net, hence the original meaning “to catch a bird”:
By extension, it gave “to suffer damage” as a bird caught in a net. The only solution is to flee, which brought the senses to leave and separate. Other spellings showed two hands closing on a bird:
Evolution of characters from the Jiaguwen period to the characters used today, from left to right:
The traditional spelling kept the basic structure with 离, which reminds the net and 隹 the bird, while the simplified one let the bird fly away 离. 离 is also the name of the trigram of the Yijing, the fire that has the meanings of sticking and attaching.
China does not have a floating exchange rate for its currency. Is this an isolated case? No, the majority of countries in the world have not adopted this system.
How is the rate of the yuan fixed?
The central bank determines it every morning at 9:15 am based mainly on two factors, the previous day’s closing rate and the fluctuations of a basket of currencies, including the dollar, which weighs 21.59%, the euro 17.40%, and the yen 11.16%. All currencies in the basket :
At 9:00 am, thirteen financial institutions quote prices, and the average rate is the rate set at 9:15 am. Transactions can start at 9:30 am with a maximum fluctuation of 2% up or down around this central rate. In August 2015, the authorities allowed the yuan to fluctuate, a fall of the currency, and a 15% drop of the Shanghai stock exchange in two days followed. Faced with the massive outflow of capital in 2016, the central bank in 2017 put in place mechanisms to avoid too strong movements, called “counter-cyclical regulatory factors 逆周期调节因子.”
Part of the Chinese financial world wants more elasticity in the Chinese currency. For Sheng Songcheng, former director of the People’s Bank Statistics Bureau, it is not a good idea to move from a fluctuation margin of 2% to 3% or even 4%. 2% is already a significant movement. The economy and businesses need hope and stability. Such magnitudes are not going in the right direction.
China, an isolated case?
He reminds us that currency controls have always existed in various ways. The Japanese government intervenes when conditions require it. In 2003, to avoid the yen’s rise, the Bank of Japan bought $150 billion on the markets. During the European debt crisis, the Swiss currency soared. The Swiss National Bank acquired massive amounts of euros to curb the rise of its money. In September 2011, it even set a floor rate: “The current overvaluation of the Swiss franc is extreme. It poses a serious threat to the Swiss economy and carries the risk of deflationary developments. The Swiss National Bank (SNB) is therefore aiming for a substantial and lasting weakening of the franc. Today, it will no longer tolerate exchange rates below 1.20 francs to the euro on the foreign exchange market. » Exchange controls similar to the Chinese system are exercised in many countries, and according to IMF data, 46.4% of countries in the world practice it, compared to 34.6% in 2009. Moreover, the National Bureau of Economic Research in Cambridge in the United States goes even further. Out of a sample of 196 countries, it estimates that 80 percent have a limited flexibility regime with inflexible exchange rates despite the excellent policy rhetoric.
Floating exchange rates, luxury
Of course, I’m not deaf. The Fox channel has been saying for at least 15 years that China is manipulating its currency, which many people repeat without really knowing the situation. A floating exchange rate and convertibility of its currency are considered a luxury in emerging countries. Indeed, China has moved beyond this stage, but it cannot yet afford such freedom. It may be the world’s second-largest economy, but 70% of its population has an income of less than 2,000 yuan per month, and structural problems are legion. The few openings have shown capital outflows and fluctuations that disrupt the economy. The government’s objective is not to meet Washington’s requirements, but it must first protect the country from risks. Permitted fluctuations, indexed on a basket of currencies, with a central rate and a 2% fluctuation margin, is for the moment the only luxury Beijing can afford. However, the future is being prepared for with the progressive internationalization of the yuan and digital currency introduction. Convertibility and the floating rate are not yet on the list, even if they are debated. In five years, ten years? Greek Calends?
I have a friend who is in quarantine in a hotel 60 kilometers from Shanghai. On his plane from Paris, a person close to him has tested positive for COVID.For quarantine, we use the word isolation 隔离 ge lí.
I had never thought about the origin of the first character 隔. On the left, 阝fǔ, which is the key to the hill, the mountain, indicates the meaning and 鬲 ge the sound. When you live far from the mountains, you are far away from everything, isolated.
Other explanations think that the element on the right 鬲 ge also contributes to the meaning. Originally, 鬲 refers to a pot or earthenware cauldron or kettle for cooking food. The three legs are empty to make it easier to reheat liquids. They are relatively far apart. By extension, the sense of insulation has come. This last explanation does not entirely convince me, but I retain it.
The second character of 离 is the distant meaning of, leave, separate; it is also one of the eight trigrams of the Yijing. We will see it tomorrow.
Hangzhou, the capital of Zhejiang province, seems to be the city with the wind in its sails. Launched in digital, it benefits from the Alibaba Group and Ant Financial. The municipality has put many measures to attract talent and aims to transform the Venice of the China into a city of the information economy and artificial intelligence. Among Chinese cities, Hangzhou attracts the most population. At first glance, the GAWC ranking, which examines cities according to their integration in the world, mainly economic criteria – finance, advertising, law, accounting, and management – is astonishing. It moves Hangzhou down from 75th place in 2019 to 90th in 2020, behind Chengdu (59th), Tianjin (77th), and Nanjing (87th). Zhengzhou moved up from 157th to 116th place. The research bureau Trigger Trend describes the reasons for this decline.
Let’s take a look at the head offices of major companies: Beijing has 58 Fortune 500 companies. Shanghai is home to 653 regional headquarters of multinationals; it is the city with the largest number of foreign organizations in China. Shenzhen and Guangzhou have had policies to attract head offices for a long time. Starting in 2018, Chengdu, Xi’an, Chongqing, Qingdao, Wuhan, and Nanjing have also introduced such measures. Hangzhou only in June became active in this area. The decline in the rankings is mainly due to this delay.
Next to Shanghai, Hangzhou cannot be a transportation center.
Last year, Hangzhou Xiaoshan Airport was ranked 10th in China in terms of passenger flow, far behind not only Beijing-Shanghai-Canton-Shenzhen airport but also Chengdu, Chongqing, Kunming, and Xi’an airports. Since 2017, Hangzhou remains in 10th place without making any progress. As for the high-speed rail network, Hangzhou is weak. In recent years, Xi’an, Zhengzhou, and Hefei have been at the heart of real railway nodes. From these cities, one can go in many directions, unlike Hangzhou. The Hongqiao station in Shanghai is a truly national center while Hangzhou has remained provincial. The road presents the same picture. The influence of Shanghai erases that of Hangzhou.
Last year, Hangzhou’s population growth was the highest in China (see the article here). In the first half of this year, Hangzhou’s total GDP surpassed Nanjing, Tianjin, and other cities, ranking in the national top 10 in the first six months of 2020. Hangzhou’s asset, the digital economy, is booming. The added value of the digital economy accounts for 24.8% of GDP. Hangzhou is also preparing to become the “first city in the country for the digital economy.”The digital economy is a beautiful facade, but the real economy is still experiencing turbulence. Students in humanities or literary subjects are faced with a real desert. Those in the sciences, outside the Alibaba group, have little choice. Apart from public companies and some real estate groups, few jobs offer to pay a real estate loan. Large companies do not abound, which limits the possibilities of evolution.
Real estate prices and inadequate infrastructure
Housing prices in Hangzhou are close to those of first-tier cities without having the same level of infrastructure. Public transportation is lagging far behind. This year, the operating mileage of Hangzhou’s subway reached 206 kilometers. In terms of operating mileage and subway density, Hangzhou cannot compete with Shenzhen, which has 383 km with an area eight times smaller. The city is slightly larger than Beijing, which has 699 km with few lines and low coverage.
The Alibaba Group is ranked first on Zhejiang’s top 100 companies in 2019, with a turnover of 376.844 billion yuan in 2019. Geely, a car manufacturer, in second place, has 328.521 billion yuan, and the famous Hikvision, 49.837 billion yuan. As for Shenzhen: Huawei is ranked second on the list of Guangdong’s top 100 companies in 2019, with revenues of 721.2 billion yuan in 2018, almost double that of Alibaba. Tencent ranks 11th and also has 316.94 billion yuan.
Investment in research
Hangzhou’s R&D investment in 2018 was 46.4 billion yuan, placing it in 7th place, far behind its competitors, see table. They represented 3.43% of GDP. In comparison, Shenzhen was at 4.8% and Guangzhou at 2.63%.
After the industrial upgrade in the early years, Shenzhen has a very comprehensive smartphone manufacturing industry and a global production base for smartphones. Hangzhou, except for Ali, has not developed such an integrated base. Besides, Hangzhou’s investment in research in 2018 was 3.43% of GDP. In comparison, Shenzhen was at 4.8% and Guangzhou at 2.63%. Concerning these data, Hangzhou is, therefore, up to the task. Compared to the Beijing-Shanghai-Canton-Shenzhen group, the relatively low internationalization is not surprising. How can we play on an equal footing with the capital, the financial center, and two bridgeheads in the first decades of the country’s opening up and development? Shanghai’s proximity has its advantages, but it cannot compete with its neighbor as a transit point. The authorities are very aware of this and are working hard to capitalize on the Alibaba/Ant advantage.
贪/貪 (traditional) tān, corrupt, greedy It took me a long time to remember how to write 贪 . It took the so-called anti-corruption（ campaign 反贪）of the new president Xi in 2013 to get the strokes into my brain. At the time, there was a lot of talk about it. I could have registered 贪 much earlier if I had known its origin.
It is composed of 今 and 贝/貝. The first meaning of 今 was contained, keep in the mouth. It lost this meaning, 含 hán took it. 贝/貝 is the cowrie, which was used as a currency during antiquity. It represents money. 今 + 贝/貝 /contain, keep in the mouth + money = 贪/貪/corruption
This comment on 贪/貪 shows again the importance of knowing the origin of characters to better learn and understand modern characters.
In fact, on the current passport, the English words “Republic of China” are confusing in some countries. Passport holders who are citizens of Taiwan are sometimes considered Chinese from the People’s Republic of China. When the COVID spread in the mainland, travelers were restricted as if they were from China. Taiwan had effective prevention of the epidemic very soon, as early as December 31, 2019. The island has only seven deaths. New passports are planned. The “Republic of China” of the old passport – on the left in the picture below – disappears on the new one. In the next version, which should be available at the beginning of 2021, only “Taiwan Passport” in English will remain.
Of course, it is easy to think of political signs too, Taiwan wants to free itself from China. In Chinese 中華民國 (translated as Republic of China) remains. Nevertheless, one cannot help but think of the signs that this change sends.
Bloomberg economists Tom Orlik and Bjorn van Roye have measured the impact of US-China decoupling. Journalist Wang Jian reacts to these estimates and recalls the Chinese response’s difficulties, the domestic cycle.
The decoupling scenario 脱钩 from economists
A complete decoupling could lead to a decline in growth to 3.5% in 2030, compared to a forecast of 4.5%, which considered the relationships unchanged. Decoupling, synonymous with the end of trade and technology flows, which stimulate growth, will have a more substantial impact on China than on the United States because China benefits more from international trade and innovation. American growth should be slightly impacted. Economists expect 1.4% in 2030, compared to 1.6% previously. In this scenario, China’s productivity growth will slow down, and capital spending will weaken as technology transfers come to a halt. The results will not be catastrophic because the country has sharply narrowed the technology gap with advanced economies over the last 20 years. Increased funding for research and development and stronger linkages with advanced economies could offset the effects of decoupling. On the other hand, the results could be more severe if the United States successfully brought its allies into decoupling, such as Korea, Japan, France, and Germany.
The importance of the 6% threshold
Wang Jian reminds that the passage of the growth under 6% will not make it possible to mitigate the country’s structural problems. The strong growth compensated for the shortcomings. With “low” relative growth, for example, the hole in social protection will not be sustainable; the government invested little in this area for various reasons: it preferred to put capital elsewhere and respond to other interests. Real estate bubbles and local debt will pose serious difficulties.
To rely on the domestic market to face the next few years is the age-old Chinese consumption problem. When Prime Minister Li Keqiang recalled that 600 million people had an income of 1,000 yuan (140 USD) per month, he was basing his remarks on figures that showed that 70% of the population did not exceed 2,000 yuan per month. Under these conditions, consumption will not be the economic engine. Figures for the second quarter indicate that consumption is lagging behind and that investment, especially in infrastructure, has driven up growth. Wang Jian estimates the parallel/grey economy (灰色经济) at 30%. Its importance differs by region. In general, the higher you go in the North, the more critical it is. It cannot have a significant weight in consumption.
The contribution to the growth of investment is + 156%, that of import-export is +16.6%, while consumption has a negative contribution of … 73%. This fall in consumption is, of course, linked to the epidemic. Will it be able to recover? These investments have been fueled by the issuance of special bonds following the epidemic. Astronomical new debts have been created.
In recent years, the government had placed its hopes on the national market. It is normal; the consumption figures presented a better picture. In 2019, it positively contributed to the growth of 57.8%, much higher than investments at 31.2%. It will be necessary to reverse the trend so that the national market presents a robust counterpart to the decoupling. Is it possible? Not immediately!